Multi-member LLC received 120 days to file a late corporate classification election

Plain-English summary

A limited liability company with 22 members intended to be classified as an association taxable as a corporation from its formation date. It missed the deadline for filing Form 8832, but neither the company nor its members filed returns inconsistent with the requested corporate treatment. The IRS found that the company satisfied the standards for late regulatory election relief and granted 120 days to file Form 8832 with a copy of the ruling. The IRS did not decide whether the company otherwise qualified for the election or address the exempt status or potential tax liabilities of its many tax-exempt members.

Ruling snapshot

• Question: May the multi-member LLC make a late election to be treated as a corporation from its formation date?
• Outcome: approved, with 120 days to file Form 8832
• Key authorities: Treas. Reg. §§ 301.7701-2, 301.7701-3, 301.9100-1, and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                  Department of the Treasury
                                                          Washington, DC 20224

Number: 201943005                                         Third Party Communication: None
Release Date: 10/25/2019                                  Date of Communication: Not Applicable
Index Number: 7701.02-00
                                                          Person To Contact:
-------------------------------                           ---------------------------, ID No. ---------------
---------------------------------------                   -----------------
-----------------------                                   Telephone Number:
------------------------------------                      ----------------------
                                                          Refer Reply To:
                                                          CC:PSI:B03
                                                          PLR-101921-19
                                                          Date:
                                                          July 30, 2019

Legend

X                 = -------------------------------
                    ------------------------

Date              = ------------------------

State             = -------

Dear --------------:

This letter responds to a letter dated January 29, 2019 submitted on behalf of X,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations to file an initial election under § 301.7701-3 to be classified
as an association taxable as a corporation for federal tax purposes.

                                                      FACTS

The information submitted states that X is a State limited liability company that was
formed on Date. X intended to be classified as a corporation for federal tax purposes.
However, X failed to timely file Form 8832, Entity Classification Election, to be classified
as a corporation for federal tax purposes effective Date. Neither X nor any of its
members filed any federal income tax or information returns for any years inconsistent
with the requested relief. Many of X’s twenty-two members are tax-exempt
organizations.

                                          LAW AND ANALYSIS

Section 301.7701-3(a) provides, in part, that a business entity that is not classified as a
corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can
elect its classification for federal tax purposes as provided in § 301.7701-3. An eligible
entity with at least two members can elect to be classified as either an association (and
PLR-101921-19                                  2

thus a corporation under § 301.7701-2(b)(2)) or a partnership, and an eligible entity with
a single owner can elect to be classified as an association or to be disregarded as an
entity separate from its owner.

Section 301.7701-3(b)(1) provides that, except as provided in§ 301.7701-3(b)(3), unless
the entity elects otherwise, a domestic eligible entity is: (i) a partnership if it has two or
more members; or (ii) disregarded as an entity separate from its owner if it has a single
owner.

Section 301.7701-3(c)(1)(i) provides, in part, that, except as provided in § 301.7701-
3(c)(1)(iv) and (v), an eligible entity may elect to be classified other than as provided
under § 301.7701-3(b), or to change its classification, by filing Form 8832 with the
service center designated on Form 8832.

Section 301.7701-3(c)(1)(iii) provides, in part, that an election made under § 301.7701-
3(c)(1)(i) will be effective on the date specified by the entity on Form 8832 or on the
date filed if no such date is specified on the election form. The effective date specified
on Form 8832 cannot be more than 75 days prior to the date on which the election is
filed and cannot be more than 12 months after the date on which the election is filed.

Under § 301.9100-1(c) the Commissioner may grant a reasonable extension of time to
make a regulatory election or a statutory election (but no more than six months except
in the case of a taxpayer who is abroad), under all subtitles of the Code, except subtitles
E,G, H, and I. Section 301.9100-1(b) provides that the term “regulatory election”
includes an election whose due date is prescribed by a regulation published in the
Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will
use to determine whether to grant an extension of time to make an election. Section
301.9100-2 provides automatic extensions of time for making certain elections. Section
301.9100-3 provides extensions of time for regulatory elections that do not meet the
requirements of § 301.9100-2.

Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be
granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer
acted reasonably and good faith, and the grant of relief will not prejudice the interests of
the government.

                                      CONCLUSION

Based solely on the facts and representations submitted, we conclude that X has
satisfied the requirements of §§ 301.9100-1 and 301.9100-3. Accordingly, X is granted
an extension of time of 120 days from the date of this letter to file Form 8832 with the
PLR-101921-19                                3

appropriate service center and elect to be treated as an association taxable as a
corporation for Federal tax purposes effective Date. A copy of this letter should be
attached to the Form 8832. A copy is enclosed for that purpose.

Except for the specific ruling above, we express or imply no opinion concerning the
federal tax consequences of the facts of this case under any other provision of the
Code. In particular, no opinion is expressed or implied concerning the exempt status of
the exempt organization members of X or the potential tax liability of the exempt
organization members of X. In addition, § 301.9100-1(a) provides that the granting of
an extension of time for making an election is not a determination that the taxpayer is
otherwise eligible to make the election.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the ruling request, it is subject to verification on examination.

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter ruling to your authorized representatives.

                                             Sincerely,

                                             Associate Chief Counsel
                                             (Passthroughs & Special Industries)



                                         By:_____________________________
                                            Stacy L. Short
                                            Senior Technician Reviewer, Branch 3
                                            Office of the Associate Chief Counsel
                                            (Passthroughs & Special Industries)



Enclosures: 2
      Copy of this letter
      Copy for § 6110 purposes


cc: